THIS is the reason I'm excited:
If this can work as shown - this will not only change the nature of gaming, but of entertainment as well. This might seem a bit creepy as first (one of the common descriptions of Milo, by the way), but what he (it!) represents is mind-exapnding.
Interacting with sophisticated artificial intelligence like this opens up so many new avenues, the list is nearly endless.
Imagine an immersive version of the "Sims" games, in which you interact directly with Sims - not in the nonsense language of the game, but in plain English!
Imagine kids questioning Julius Caeser as he stands in the Forum in Rome, or George Washington, or, for that matter, Martin Luther King. History will (almost) come alive as a classroom - or an individual student - develops a personal relationship with historical figures.
Instead of simply watching a horror movie, imagine interacting with the characters in the production. Say hello to Hannibal Lector!
I look forward to seeing the progress of this technology. As the saying goes, "it could change everything."
Other related links:
Live Demo at E3: